Health Care Current | November 1, 2016

You can not build a new house without the proper tools

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory, and legislative changes.

My Take

You can’t build a new house without the proper tools

By Mitch Morris, MD, Global Life Sciences and Health Care Industry Leader, Deloitte Consulting LLP

Today, physicians are under intense pressure to improve outcomes and reduce costs. One of the main drivers behind this pressure: The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA creates incentives for physicians to adopt alternative payment models (APMs) and pushes the industry to reward outcomes over processes.

But findings from Deloitte’s 2016 Survey of US Physicians suggest that, perhaps to no one’s surprise, not all physicians are ready to dive head first into the risk-based models that MACRA encourages. Using a combination of demographics, practice-setting characteristics, and measures of tools and resource availability, researchers predicted physician willingness to participate in value-based payment models. A regression analysis revealed three segments of physicians:

  • Willing: With appropriate incentives, this group is likely to participate in value-based payment models. Many already have the necessary tools for, and experience with, value-based care and performance-based compensation models.
  • On the fence: These physicians are more cautious about value-based payment models, as they have less experience with them and fewer tools and capabilities to support them.
  • Resistant: This segment is skeptical about value-based care, and is unlikely to participate in these models even when provided with tools and incentives.

The survey revealed that only one-half of surveyed physicians would put more than 15 percent of their compensation at risk. But, when physicians have care pattern information, clinical protocols, and access to an electronic health record (EHR) system that meets Stage 3 Meaningful Use requirements, their willingness to participate in value-based care increases.

To many physicians, it may seem like with all of the focus on new payment models, increasing reliance on quality measures to gauge performance, and new ways to influence how physicians deliver care, their expertise has been pushed to the side. Indeed, 74 percent of surveyed physicians believe that performance reporting is burdensome, and 79 percent do not support tying compensation to quality.

Physicians will face greater pressure under MACRA, regardless of the route they choose. Those who choose to stay out of the risk game in the first few years will be faced with reporting under the Merit-Based Incentive Payment System (MIPS). While the US Centers for Medicare and Medicaid Services (CMS) recently announced greater flexibility around reporting in the first year, clinicians must report something to avoid financial losses under MIPS.

As the saying goes, a carpenter is only as good as his or her tools. Many physicians recognize that the same is likely true under MACRA: if given access to the right tools, they could be more successful. When made available, tools such as clinical protocols and decision support tools, care pattern reports, and information on physician referral behavior can impact performance. However, our survey suggests that many physicians currently lack these tools.

Variations in care lead to variations in cost and quality. The Dartmouth Atlas of Care estimates that as much as 20 to 30 percent of all US health care spending may be unnecessary.1 Clinical protocols and decision support tools to inform care decisions can help reduce variation. But, the information needs to be easy to use and offer the appropriate level of detail. Most physicians have favorable attitudes toward using clinical protocols: 60 percent of physicians report that the positive aspects of having protocols outweigh the negatives, and 48 percent think that reducing clinical variation could help improve the performance of the US health care system. However, some physicians expressed concern that clinical protocols limit physicians’ ability to make clinical decisions (43 percent agree and 35 percent disagree with this statement). Loss of clinical autonomy has been a major barrier to clinical protocol adoption.2

Care pattern reports can provide physicians with feedback on their clinical practices. They should contain information on patient experience, quality of care, resource use, or cost and can be used for continuous quality improvement or for performance-based compensation arrangements. Sixty-five percent of surveyed physicians report receiving care pattern information. However, many physicians reported receiving information on “process” measures and would prefer information on clinical outcomes.

Finally, for organizations building value-based care capabilities, understanding physician referral behaviors and patterns can be a way to find savings or improve outcomes.3 Giving physicians data on their referral patterns could encourage them to rely less on habitual referrals and more on evidence to recommend to patients which care setting (e.g., post-acute care) or treatment (e.g., specialist or further diagnostic tests) is the appropriate next step.

It’s clear that despite the progress that has been made to date, major hurdles remain. Evidence indicates that regardless of financial incentives to reduce costs and improve care quality, physicians could have a difficult time meeting these goals if they lack the appropriate tools. Many physicians want broader clinical protocols, quality measures that align with their specialties and emphasize outcomes over processes, and detailed data on their own performance and on those to whom they refer patients.

Data-driven tools such as these can give physicians insight on cost and quality metrics and could help them make care decisions that are consistent with effective clinical practice. As physicians face greater pressure to improve quality and cost, health care leaders should recognize that, as with any trade, high-quality tools are needed to produce high-quality outcomes.

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1 The Dartmouth Atlas of Health Care, “Reflections on Variations”
2 Hope Kenefick, Jason Lee and Valerie Fleishman, “Improving Physician Adherence to Clinical Practice Guidelines,” New England Healthcare Institute, February 2008; Dan Mendelson and Tanisha V. Carino, “Evidence-Based Medicine In The United States—De Rigueur Or Dream Deferred?” Health Affairs, January 2005, vol. 24 no. 1 133-136,; The McDonnell Norms Group, “Enhancing the Use of Clinical Guidelines: A Social Norms Perspective,” Journal of the American College of Surgeons, May 2006, Vol. 202, No. 5,
3 Zirui Song, Thomas D. Sequist and Michael L. Barnett, “Patient Referrals: A Linchpin for Increasing the Value of Care,” The Journal of the American Medical Association, July 2014, vol. 312(6) 597-598,

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Implementation & Adoption

CMS announces additional Advanced APM options under MACRA

Last week, CMS announced that it would add options for clinicians to participate in advanced APMs in 2017, the first performance year under MACRA.

The Oncology Care Model (OCM) will be available beginning in 2017, instead of 2018, and it will qualify as an advanced APM. Based on changes CMS made to the financial risk standard for advanced APMs published in the final rule, the agency also expects the following models to qualify as advanced APMs in 2017:

  • Comprehensive End-Stage Renal Disease (ESRD) Care Model (large dialysis organization (LDO) arrangement)
  • Comprehensive ESRD Care Model (non-LDO arrangement)
  • Comprehensive Primary Care Plus (CPC+)
  • Medicare Shared Savings Program (MSSP) Accountable Care Organization (ACO) Track 2 and Track 3
  • Next Generation ACO
  • OCM two-sided risk arrangement

CMS said that it will publish a final list of advanced APMs for 2017 before January 1, 2017. The agency also announced that there will be additional opportunities for clinicians to participate in advanced APMs starting in 2018:

  • MSSP ACO Track 1+ (further detail forthcoming; this model would help MSSP ACO Track 1 participants transition to shared risk arrangements)
  • New voluntary bundled payment models
  • Comprehensive Care for Joint Replacement Model – Certified Electronic Health Record Technology (CEHRT) track
  • Advancing Care Coordination through Episode Payment Models – CEHRT track

For more information, see the October 26, 2016 Reg Pulse Blog post, CMS continues push to offer additional Advanced APM options under MACRA.

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Report: Nearly 40 percent of health plan and Medicaid spending linked to quality and value in 2015

A new report by the Health Care Payment Learning and Action Network (HCP-LAN) finds nearly 40 percent of health care spending for health plans and Medicaid flowed through models that link payments to quality in 2015. HCP-LAN analyzed surveys and Medicaid and Medicare Advantage data from CMS. The sources represent a combined total of 70 health plans covering 67 percent of all covered lives in the US, excluding traditional Medicare.

The analysis categorized payment models into four groups:

  • Category 1: Traditional fee-for-service (FFS) with no link to quality and value
  • Category 2: FFS payments linked to quality and value
  • Category 3: APMs built on FFS architecture
  • Category 4: Population-based payments

FFS payments still encompassed 62 percent of the spending in 2015, but the rest of the payments were tied to quality and value of care.

The group also looked at the data it has received so far for 2016. It found that 25 percent of spending fell under categories 3 and 4. Of that, 22 percent is commercial spending, 41 percent is Medicare Advantage, and 18 percent is Medicaid.

The group excluded traditional Medicare data from its analysis because CMS has been tracking on how the program is progressing toward its goal to tie more payments to quality. In the future, the HCP-LAN analysis could include more data from traditional Medicare, however.

(Source: Health Care Payment Learning & Action Network, “Measuring Progress: Adoption of Alternative Payment Models in Commercial, Medicare Advantage, and State Medicaid Programs,” October 25, 2016)

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Exchange plans had lower average premiums and deductibles than other plans sold in the individual market

Average premiums and deductibles for individual and small-group exchange plans sold through the public health insurance exchanges were 13 percent cheaper than plans sold off the exchange, according to a Modern Healthcare analysis of new exchange data from the Robert Wood Johnson Foundation (RWJF). RWJF released new data on all plans offered on the individual market outside of the exchanges. It has information on premiums, deductibles, out-of-pocket costs, cost-sharing, prescription drugs, emergency room visits, and inpatient and outpatient visits.

The analysis discovered several differences among plans sold on and off the exchanges in the individual market:

(Source: Harris Meyer, “New data expose mysterious world of off-exchange health plans,” Modern Healthcare, October 2016)

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On the Hill & In the Courts

Senate Finance introduces CHRONIC Care Act discussion draft

Last Thursday, the Senate Finance Committee released a bipartisan draft proposal to improve care for Medicare beneficiaries with chronic illnesses. The Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act of 2016 is sponsored by Committee Chairman Orrin Hatch and Ranking Member Ron Wyden.

To reduce costs and protect patient safety, the Committee’s proposal would expand eligibility for telehealth services and Medicare Advantage (MA) health plans. The proposal supports CMS Innovation Center demonstrations for chronically ill population. It would expand benefits, alter plan benefit designs, and provide non-traditional Medicare services, often in the home.

The Committee members sent a letter to health leaders in the administration to highlight areas where their priorities were aligned and areas where the administration has already taken action. The discussion draft, which met with broad industry support, asks the HHS Secretary to consider how to implement the proposals. For example, the Committee discusses excluding more expensive treatments associated with chronic illness (e.g. kidney transplants) from MA benefit designs but continuing to pay for those services on a fee-for-service basis. It also requests the Secretary consider whether MA SNPs targeting chronically ill populations should be included in the star ratings program.

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HHS: Premiums and tax credits in the exchanges will increase in 2017

Last week, the HHS Assistant to the Secretary for Planning and Evaluation (ASPE) said that the average cost for benchmark qualified health plans (QHPs) – the plan to which subsidies are tied – will increase 25 percent in 2017. The median premium increase will be 16 percent. ASPE published these figures in the annual Marketplace Landscape Brief for the 2017 coverage year. The report analyzes availability and affordability of QHPs in the federal and state-based exchanges.

Last year, premiums increased by an average of 7 percent. However, last year’s benchmark premium rates were 12-20 percent below the Congressional Budget Office’s (CBO) original projections and 10 percent lower than comparable employer-sponsored insurance premiums, according to a report from the Urban Institute. According to ASPE, the 2017 benchmark rates align more closely with CBO projections.

Premium tax credits (PTC) exist to subsidize coverage for people with low- and moderate-incomes. The credits are based on the yearly cost of the benchmark QHP. Higher premiums will trigger higher PTCs, and more consumers will become eligible for help. Federal spending also will increase. ASPE estimates that 22 percent of the 1.3 million public exchange enrollees who did not receive PTCs in 2016 may become eligible for them in 2017.

Consumers will be able to choose from 30 different QHPs on average. Nearly 80 percent will have a choice of two or more health plan carriers, while 56 percent will be able to select a plan from three or more.

Related: As explained in the November 1, 2016 Reg Pulse blog post, in releasing the premium information for the 2017 benefit year, HHS underscored that individuals who receive tax credits for exchange coverage will generally be shielded from the full force of the premium increases because PTCs will increase so that individuals’ contributions to premiums do not exceed certain percentages of their household income. Individuals who do not receive PTCs and purchase coverage in exchanges will face the full premium increases. HHS also said that many individuals purchasing coverage via exchanges could find lower-premium plans if they enrolled in coverage different than what they had for 2016.

(Source: HHS ASPE, “Health Plan Choice and Premiums in the 2017 Health Insurance Marketplace,” October 24, 2016)

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CMS: Hospital Compare updated with Veterans Health Administration data

Earlier this month, CMS announced that it will include Veterans Health Administration (VHA) hospital performance data on the website. This website allows patients and caregivers to compare quality and performance for hospitals and make informed health care decisions and encourages hospitals to improve care.

The VHA data tables will be updated quarterly and will include:

  • VHA satisfaction survey results
  • Quality outcome measures, including mortality and readmission rates for certain conditions
  • Behavioral health measures
  • Patient safety measures

CMS will add data in December 2016 to better compare VHA and civilian acute care hospitals. The goal is to present VHA quality and safety data to Veterans and their families in a format that is useful and understandable. The Hospital Compare website was last updated in July 2016 when CMS added the Overall Hospital Quality Star Rating feature (see the August 2, 2016 Health Care Current).

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Medical device pilot program to continue indefinitely with parallel reviews

The Parallel Review of Medical Devices pilot program will be fully implemented and extended indefinitely, the US Food and Drug Administration (FDA) and CMS recently announced. The parallel review by the FDA and CMS intends to reduce time between device approval and Medicare coverage determinations of innovative medical devices. Medical device manufacturers also receive feedback that helps to reduce the number of trials required to get clearance.

A major criticism to the parallel review program is that few device manufacturers have gone through the program successfully. Only one medical device, Cologuard, has successfully gone through the parallel review program. Medical devices made by Foundation Medicine and Medtronic have not yet been approved, though they were accepted into the program.

Despite the parallel review, the agencies use different standards to determine approval. Nonetheless, both agencies are urging medical device manufacturers to apply for the parallel review program.

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Around the Country

CMS and Washington to finalize accountable health communities Medicaid waiver

Earlier this month, CMS announced that it tentatively approved a five-year Medicaid waiver that provides Washington with $1.5 billion in federal funding to conduct delivery system reform, form partnerships with social service programs, and pursue other efforts to improve physical and behavioral health for Medicaid enrollees in the state. While the Washington State Health Care Authority and CMS have agreed on a concept, details are still being negotiated.

The project is part of the state’s effort to engage accountable communities of health (ACHs), where stakeholders pool resources and better coordinate care to improve health and outcomes. Funding is available for housing services, long-term care services, and to support unpaid family caregivers.

Over five years, the 1115 demonstration waiver will provide up to $1.1 billion of incentives for delivery system reform and $375 million to support care services for Medicaid beneficiaries.

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CMS approves Vermont’s all-payer ACO model

CMS and Vermont have agreed to create an all-payer accountable care organization (ACO) model, which will participate in Medicare. CMS also approved a five-year extension of Vermont’s 1115 Medicaid demonstration waiver to allow Medicaid to be a full partner in the all-payer ACO model.

The model will begin on January 1, 2017 and will run for six years. During the first year of the program, CMS will provide the state with $9.5 million in start-up funding to help providers with care coordination, collaboration with community-based providers, and practice transformation efforts.

Participation in the all-payer ACO model is voluntary. Providers who participate would be in a two-sided risk model, which will be considered an advanced APM under CMS’ Quality Payment Program. Those physicians and other clinicians could qualify for advanced APM bonus payments beginning in performance year 2018.

Related: This is not the first time CMS has approved an all-payer model. In 2014, CMS began allowing Maryland to use an all-payer model to pay hospitals a global budget for the whole year, regardless of how many patients they treat or if the care was delivered in an inpatient or outpatient setting. Maryland’s global budget experiment helped the state slow cost growth and save Medicare approximately $116 million in the first year (see November 24, 2015 Health Care Current).

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Breaking Boundaries

The future of artificial intelligence: Applications for health care

The National Science and Technology Council, together with its Subcommittee on Machine Learning and Artificial Intelligence, released “Preparing for the Future of Artificial Intelligence” last month. The report discusses how progress in artificial intelligence (AI) technology has created new markets and new opportunities in health care, as well as education, energy, and the environment. It contains recommendations for federal agencies and others to realize the potential of AI to drive economic growth and social progress.

In general, AI is a computerized system that exhibits behavior that is commonly thought of as requiring intelligence and a system capable of rationally solving complex problems or taking appropriate actions to achieve its goals as it comes across real world scenarios. An example of AI in health care is in radiology. In a recent study, an AI system examined images of lymph node cells and had to determine whether or not the cells contained cancer. The results showed the AI approach had a 7.5 percent error rate, where a human pathologist had a 3.5 percent error rate. When researchers combined the two approaches, using both AI and human input, they found that the error fell to 0.5 percent, or an 85 percent reduction in error.

The Council highlighted some of the ways the Department of Veteran Affairs (VA) is using AI to predict medical complications and improve treatment of severe combat wounds. AI is helping VA achieve better patient outcomes, faster healing, and lower costs. Other health systems around the country are also using predictive modeling, a type of AI, to reduce hospital-acquired infections. The Council expects that the continued transition to EHRs will help pave the way for predictive analysis of health data to advance precision medicine and cancer research. The Council also discusses how automated vehicles using AI may improve mobility and access to medical appointments for older Americans and Americans with disabilities who do not drive.

The 23 recommendations for government include acting as a convener, monitoring the safety and fairness of applications as they develop, supporting basic research, and adapting regulatory frameworks to encourage innovation while protecting the public.

Analysis: Deloitte’s recent report, Top 10 health care innovations, features AI as an innovation that can help the health care industry achieve more for less (more value, better outcomes, greater convenience, access and simplicity; all for less cost, complexity, and time required by the patient and the provider, in a way that expands what is currently possible).

The ability of computers to think like humans is anticipated to transform health care by completing tasks currently performed by humans with greater speed and accuracy, and using fewer resources. Within health care, AI includes clinical tasks such as diagnosing patients and spotting disease outbreaks earlier; accelerating the development of new drugs and devices; and streamlining administrative duties such as approving claims and rooting out fraud. AI may improve the accuracy, precision, and timeliness of patient diagnoses, which could increase therapeutic success rates and decrease unnecessary medical interventions. Population health could improve with better understanding of behavior patterns that impact chronic disease outcomes. Streamlining administrative tasks may improve operational efficiencies.

Greater adoption of AI will likely depend on innovators’ ability to decrease cost and improve accuracy of technologies such as natural language processing, big data, and cognitive technologies. It also depends on health care professionals’ and patients’ acceptance and trust of AI tools.

(Source: Executive Office of the President National Science and Technology Council Committee on Technology, Preparing for the Future of Artificial Intelligence, October 2016)

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